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Coles rejects ACCC claims

Coles rejects claims of unconscionable conduct as alleged by the ACCC in its Statement of Claim lodged in the Federal Court today.

October 2014

The ACCC's allegations concern a limited number of dealings with five Coles suppliers three years ago. For context, Coles has over 4,000 suppliers, and is in contact with many of them on a daily basis. It has millions of individual contacts with suppliers every year.

All five suppliers continue today to be valued suppliers to Coles.

The allegations involve communications and negotiations about the failure to deliver products in the lead-up to the Christmas 2011 trading period, as well as waste and damage to products and the profitability of products.

The individual communications with, and regarding, suppliers referred to in the ACCC’s Statement of Claim, were part of ongoing commercial negotiations involving a much broader, longer-term trading relationship with each supplier.

These are normal topics for business discussions between grocery suppliers and retailers in Australia and around the world. Furthermore, commercial negotiations can be robust, regardless of the industry or sector.

The allegations include a day previously called Profit Day. This was an administrative day where discussions were held with suppliers in relation to outstanding claims and additional business opportunities.

These discussions, including those concerning profit gaps, were aimed at improving the profitability of products. Profit gaps can occur when a product’s financial performance fails to meet business plans or expectations discussed between Coles and its suppliers. Products with poor sales performance limit Coles’ ability to deliver value to customers.

The failure of suppliers to deliver agreed quantities of stock at agreed times, contrary to the terms of their contracts with Coles, results in significant shortages of stock in store. Empty shelves are a major source of customer frustration. During the cited period in 2011, Coles’ team members were working hard to get products on shelves for our customers in the lead-up to Christmas, the busiest trading period of the year.

High levels of waste or the poor performance of products can contribute to higher prices for customers, which is why these issues are actively managed by Coles. Product waste can arise from various means including faulty packaging of product by suppliers, suppliers delivering products too close to their use by date or mishandling by suppliers or Coles. In other words, responsibility for waste may lie with the supplier, the retailer or it may be shared. Again, payments for waste are a common business practice in retail in Australia and around the world.

Coles conducts substantial training with all team members to ensure that its suppliers are treated in an open and fair manner. Furthermore, since 2011 Coles has taken substantial steps to improve its ways of working with suppliers. Coles has also been a leading voice since 2013 in the industry-led drafting of the Food and Grocery Code of Conduct, which is currently with the Department of Treasury.

This year, Coles initiated a Supplier Charter with the aim of strengthening relationships with suppliers. The Charter is a formal commitment to deal in good faith with our suppliers and provides suppliers to Coles with a strong, independent and confidential dispute resolution process. Former Victorian Premier Jeff Kennett has been appointed as the independent arbitrator under the Charter.

Coles is convinced retailers and suppliers will both benefit from quicker, low-cost dispute resolution.


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